Hungary's central bank, Magyar Nemzeti Bank (MNB), is unanimously expected by analysts to cut its base rate by 25 basis points to 5.75%, continuing the easing cycle that resumed in June with a similar cut [1]. This move is justified by a sharply lower inflation outlook, with the June Inflation Report revising the 2026 average Consumer Price Index (CPI) forecast down to 1.8%, and Governor Mihaly Varga stating that inflation is not expected to exceed the 3% target through the remainder of this year or in 2027 [1]. The rate cut is widely anticipated and signaled, and is not expected to have a noticeable impact on the Hungarian Forint (HUF), which has recently weakened due to global risk aversion and geopolitical tensions, particularly the resumption of the US-Iran war [1]. The MNB's easing is seen as a response to the improved inflation outlook rather than an attempt to support growth, with the Monetary Policy Council remaining cautious amid fiscal uncertainty and higher energy prices [1].
In contrast, the Czech Koruna (CZK) has been supported by the Czech National Bank's (CNB) hawkish stance, with more than two rate hikes now priced into the market, a position seen as excessive by ING strategist Frantisek Taborsky [2]. The CNB is the only regional central bank to have hiked rates in response to the US-Iran conflict, and its rhetoric is credited with stabilizing the koruna and keeping it ahead of other Central and Eastern European (CEE) currencies on risk-off days [2]. Regional data in Poland and the Czech Republic are described as constructive, with the Czech Ministry of Finance planning to cut bond issuance after strong demand for retail bonds, reducing government bond supply for the rest of the year [2]. Despite these positive regional developments, CEE currencies remain heavily influenced by US-Iran tensions and oil prices, with only marginal gains seen recently [2].
Analysts at Commerzbank and ING both highlight the dominant influence of global geopolitical risks on regional currencies, with the Forint's recent weakness attributed to global risk aversion rather than domestic policy moves [1][2]. ING remains bullish on the CZK, suggesting that unless the US-Iran conflict escalates, the EUR/CZK exchange rate could move below 24.15, after having briefly touched 24.30 last week [2].
Overall, while Hungary is proceeding with cautious monetary easing due to a favorable inflation outlook, the Czech Republic is maintaining a hawkish policy stance, which is supporting its currency amid ongoing geopolitical uncertainty [1][2].
CONCLUSION
Hungary's central bank is expected to cut rates further on the back of improved inflation forecasts, a move that is unlikely to significantly impact the Forint due to prevailing global risk aversion. Meanwhile, the Czech Koruna is benefiting from the CNB's hawkish stance, with market participants pricing in further hikes. Both currencies remain sensitive to geopolitical developments, particularly the US-Iran conflict and oil prices.